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Did the Fed and Bernanke Just Slam the Banks?

March 19, 2009 RSS Feed Print

Economist Robert Brusca raises a point that has been nagging at me since yesterday afternoon. The current upward sloping yield curve, where short-term rates are way below long rates, should boost bank profitability since they borrow short and lend long. (Easing M2M rules is also a big boost.) But now the Fed is trying to lower rates at the lond end. Brusca puts it this way: "Lowering long term yields works at cross purposes with helping the banks. Banks borrow short and lend long. So reducing rates at the long end is not good for bank profitability."

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Bernanke slamming banks as about him slamming anyone with money in the bank.
Interest rates on savings ought to be about 5% and mortgages ought to be about 8%. The variations from that are inappropriate tinkering using money from thin air.

Muser of NM 4:37PM March 19, 2009

I expect this kind of nonsense from politicians who can't foresee their mistakes and won't admit them later-but Bernanke and the gang should understand what makes the banks tick!

Pat of IL 2:11PM March 19, 2009

Did the Fed and Bernanke Just Slam the Banks?

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